Trump agrees to NAFTA talks, no exit -- for now

President Donald Trump hedged his agreement to renegotiate -- rather than exit NAFTA -- with a warning to Canada and Mexico Thursday that the US will jettison the trade accord if there is no "fair deal."

Trump's unrelenting back-and-forth seemed certain to keep Washington's two closest trade partners on edge as they move to revamp one of the world's biggest trading blocs.

The Republican billionaire had threatened to scrap NAFTA altogether during his presidential campaign, and has kept his partners guessing about his intentions ever since.

While most of his fire has been directed at Mexico, Trump abruptly shifted course this week to pick fights with Ottawa over softwood lumber and dairy products.

US media reported on Wednesday that he was likely to give formal notice of pulling the United States out of NAFTA -- and then came the White House announcement that the US would renegotiate the agreement after all.

In phone calls Wednesday to Mexican President Enrique Pena Nieto and Canadian Prime Minister Justin Trudeau, the White House said, Trump "agreed not to terminate NAFTA at this time."

On Thursday, Trump confirmed that was the case, but added a twist in a pair of early morning tweets.

"I received calls from the President of Mexico and the Prime Minister of Canada asking to renegotiate NAFTA rather than terminate," the president said.

"I agreed, subject to the fact that if we do not reach a fair deal for all, we will then terminate NAFTA. Relationships are good - deal very possible!"

- A fixture since 1994 -

NAFTA has been a fixture in US relations with its two neighbors since it went into effect January 1, 1994 under president Bill Clinton.

It removed tariffs and allows a free flow of goods between the United States, Canada and Mexico.

The US trade deficit in goods and services last year with Mexico was $62 billion, but with Canada the US had a surplus of $8 billion.

The news from Washington soothed fears of a possible trade war and sent most Asian markets up Thursday.

In Mexico, Foreign Minister Luis Videgaray said Thursday that Trump's threat to withdraw from NAFTA had been "a real possibility."

"We've confirmed it was something under consideration," he told Mexico's Radio Formula.

But Videgaray saw it as directed at the US Congress, where he said "there has been a significant delay in starting the process that would enable a renegotiation."

Trump's nominee for US trade representative, Robert Lighthizer, has yet to be confirmed by the full Senate.

In its statement, the White House said the leaders of the three countries had "agreed to proceed swiftly, according to their required internal procedures."

"It is my privilege to bring NAFTA up to date through renegotiation," it quoted Trump as saying.

During the US presidential campaign, Trump had called NAFTA "the worst trade deal maybe ever signed" and a "disaster" that had cost the United States millions of jobs as companies moved plants to Mexico.

Just last week, he said it was "very, very bad for our companies and for our workers, and we're going to make some very big changes, or we are going to get rid of NAFTA once and for all."

- 'Rumor' of US exit -

Two White House officials had told the Politico news website that a draft executive order for the US exit from NAFTA was in the final stages of review, and could be unveiled within a week or two. A senior administration official told The New York Times that Trump was likely to sign the order.

But late Wednesday Commerce Secretary Wilbur Ross brushed off the reports as "rumor."

The administration's talk of leaving NAFTA has run into opposition from several prominent Republican lawmakers, including border senators John McCain of Arizona and John Cornyn of Texas, Politico reported.

McCain told Politico he'd welcome a renegotiation, but a withdrawal would "be disgraceful and a disaster."

The Trump administration has slapped tariffs in recent days on some imports of Canadian timber and threatened to retaliate against Canadian moves that harm US dairy farmers. Timber and milk, however, are not covered by NAFTA.

The timber dispute between Washington and Ottawa goes back at least 35 years, with US producers accusing Canada of exporting lumber at unfairly subsidized prices.

Canada's dairy sector is protected by tariffs on imports and controls on domestic production as a way to support prices for the country's farmers.

The latest row was triggered when Canada extended those policies to apply to ultrafiltered milk, a product used in cheese production and at the center of a thriving US export business.